Shares Slip As Control Over Heathrow Threatened

This weekend's news of an agreement between the United States and the European Union regarding the long-bandied "Open Skies" deal was met by nearly everyone in the commercial airline industry with guarded optimism... but investors in British Airways think the deal flat-out stinks.

On Monday, those investors voted their disapproval with their money, as shares in the UK carrier experienced their biggest drop in two years.

The reason for the drop? An Open Skies agreement would expose British Airways to new competition at London's Heathrow Airport, according to Bloomberg. Currently, BA competes only with Virgin Atlantic, United Airlines and American Airlines (which has a code-share deal with BA) for lucrative trans-Atlantic flights out of Europe's busiest airport.

The fear is that Open Skies wouldn't only open the airways.., it would throw open the playing field at Heathrow, as well, for new carriers to begin service from the airport.

"The deal agreed last week could have deep implications for the airline, when you consider that the majority of BA's profits come from routes on the North Atlantic," said Panmure Gordon broker Gert Zonneveld. As much as 60 percent of the carrier's revenue comes from trans-Atlantic routes.

Shares in British Airways closed Monday about seven percent lower, or $9.65. At one point, shares in the airline had fallen nearly 10 percent.

The tentative Open Skies agreement goes before the European Commission on March 22. British Airways chairman Martin Broughton doesn't mince words when asked his opinion of the deal.

"Greedy American eyes are on Heathrow," he said Monday. "We know that's what they're after, and it's a very single-minded approach."

FMI: www.britishairways.com